BP PLC (BP, BP.LN) is poised to unveil a share swap agreement with OAO Rosneft, the state-controlled Russian oil firm, according to people familiar with the matter, in a deal that will deepen the U.K. company's ties in Russia.

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BP already owns a roughly 1% stake in Rosneft, and last year it struck a complex deal to effectively borrow against the stake when it was rushing to raise funds to help pay for the cost of the Gulf of Mexico oil spill.

For BP, which already has a significant joint venture in Russian known as TNK-BP, such a deal might give it greater access to Russia's vast resources of oil and gas.

For Rosneft, an agreement could be an opportunity to pick up BP's shares while they are still depressed in the aftermath of last year's Deepwater Horizon disaster in the Gulf of Mexico. Many analysts believe the company's shares remain undervalued as BP battles the massive cleanup and legal costs of the spill.

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BP p.l.c. (BP) is an integrated oil and gas company. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants and the petrochemicals products used to make everyday items, including paints, clothes and packaging. The Company operates in three business segments: Upstream, Downstream and Rosneft. The Upstream segment's activities include oil and natural gas exploration, field development and production; midstream transportation, storage and processing, and the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs). The Company's Downstream segment's activities include the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum, petrochemicals products and related services to wholesale and retail customers. BP's interest in Rosneft, an oil company in Russia, is reported as a separate operating segment. more »

In other news announced over the weekend, Transocean executives have awarded themselves bonuses for their "exemplary statistical safety record". Surely an April Fool, no?

Transocean, the world’s largest offshore rig company, awarded its executives bonuses for 2010, citing “the best year in safety performance in our company’s history,” in spite of the Macondo disaster in the Gulf of Mexico, according to a regulatory filing.

“Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record as measured by our total recordable incident rate and total potential severity rate,” Transocean said in a filing.

“As measured by these standards, we recorded the best year in safety performance in our company’s history, which is a reflection on our commitment to achieving an incident free environment, all the time, everywhere.”

This is going to be interesting - if not entirely surprising. As I first suspected and posted here (exactly a year ago, as it happens)

I can't see BP being implicated in any of this. I think that Transocean and any service companies who operate Zone II units or whose emploeyes have access to electrical equipment that isn't intrinsically-safe will be the ones who will wait in some trepidation for the investigations to be completed

...the destruction of the rig is not assured until you have a spark. And then an explosion.

You can have any amount of gas-cut sludge pissing out of the well without exploding as long as the rig does what it is supposed to do, which is to render itself inert by shutting off all circuits which aren't intrinsically safe. And that should happen at first sniff of gas at surface resulting in yellow flashing lights, loud sirens, semi-darkness and the depressing sight of all your systems suffering a plug-pull.

And if your rig is still there, then so is your riser and so is your BOP. All of which gives you a platform from which you can deal with the problem. It could have been over in under a week. They need to find out what ignited the damned thing and I'd say it's odds-on that Transocean kit - or possibly that of another service provider - caused it.

If they can get that sewn up, they can then go back and look at contributory causes to the leak itself. For which they seem reckon they can get Cameron on the hook too.

The fact remains that if there hadn't been a spark, there would at least have been a stable platform (in this case the Deepwater Horizon itself) from which to combat the release. It was the capsizing rig which damaged the riser, not escaping hydrocarbons - or even the fire.

It's perhaps in the nature of lawsuits that it's unlikely that BP will get their full claim (dare I say that it may even be politically unacceptable?). Nevertheless, the share purchases I made shortly after the event and during the clean-up are my bet that they will get a substantial proportion.

AIUI, since the Macondo leak, BP has disposed of more than $20 billion of assets. They all sold for way over book value. A sum-of-the-parts valuation of the co is now well above the current enterprise value. So worst case scenario is that the co gets
a) taken over or
b) broken up and sold off

in either case the current share price looks like bargain basement to me

of course with many other stocks suffering from price weakness BP is far from alone in looking cheap right now

but I'm more inclined to buy rather than sell

Have to add that I'd expect ExxonMobil or even the Chinese to be giving serious thought to a bid. Might be kinder to put BP out of its misery. Can't remember such a catalogue of management errors and misjudgements in an oil major as BP has delivered in the past year or two.

A poor couple of days in the markets and it'll be back down to bargain territory

The issue with BP is two-fold:

1) Do they have a credible strategy (given the "false start" with Rosneft)?

2) Do they have significant legal liabilities over the GoM incident?

I'm a lot more comfortable with the second point than the first - and I wonder how BP would sum up their own strategy at this point. A few years ago it was "Beyond Petroleum".....and that got quietly backburnered. Then we had the move into Russia. But what will the next move be? There may be a perception that they are rather thrashing around looking for a good way forward?